Anyone who is in, or paying attention to, the manufacturing industry is in a state of unease – with good reason. Just a few of the challenges manufacturers are facing include: slow-growth in 2017, low output projections for 2018, political uncertainty at home and abroad, money for growth is tight, the energy supply chain is still depressed and foreign trade is at historically low levels.
It is difficult to be a small business owner in manufacturing right now. Many owners are taking an “I’m going to wait and see what happens” approach. Overall, that is a good idea, so long as you hunker down with a strategy. Risk adverse owners are going to wait it out and do nothing. Risk smart ones are going to wait it out with a plan. They will be the ones who come out of these tough times stronger than ever and positioned for growth.
There are a lot of opportunities out there to position your company for success, if you know where to look.
Focus on Productivity
On average the typical $5 million company is leaving $100,000 – $300,000 on the shop floor, much of it lost in production. Finding and fixing problem costs in a slow-growth time is a no-brainer. You and your employees have the time to create, add, try, and tweak new systems, before you get busy again.
You may need outside help to identify and correct the harder problems, but spending $50,000 to save $100,000 minimum is just good business. It saves you money during down times and gives you the ability to ramp up immediately when things pick up.
Get serious about analytics and data
Simply put -The goal of analytics is to use data to improve business management (i.e. cost control, quality, productivity, estimating, inventory). In manufacturing a lot of small business owners are resistant to using analytics as a management tool. Consequently, they are being left further and further behind; soon they will be left out.
Companies up and down the supply chain are starting to assume that everyone has and uses operational data. The expectation, especially with tech natives, is that data will be shared for everyone’s benefit. For example: You have an on-going problem with shipping defective parts to your largest customer. How are you going to answer when he says, “What do your analytics say? Send me your numbers along with your action plan. Let’s get this fixed.”
Learn how to estimate and bid
The inability to estimate and bid is one of the top 3 reasons manufacturing businesses fail. Take this easy test to see if you know how to do it – answer all the following questions with facts, not guesses or assumptions. If you do not have hard numbers it is time to learn how to do it correctly.
What are your margins? How often do you look at your profit/loss statement (should be no less than weekly)? What is your overhead? What is your break-even point? How much rework are you doing and why? How are you calculating how much of your overhead is applied to each job? What is your machine loading? What are your percentages of waste and scrap? What are your warranty costs?
Succeeding in difficult times requires patience and resolve. Waiting for the smoke to clear can be a good strategy, unless it means doing nothing while you are waiting. Doing nothing is standing still and standing still quickly turns into going backwards. Smart owners will move forward by getting their companies in good working order while waiting.
At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information: